For the second time in two years, oil taxes have prompted a special session of the Alaska Legislature. Or, to put it another way, state Senate leaders outsmarted themselves and were unable to get to the negotiating table with their counterparts in the House during regular session.
Here is what happened. In March of last year, the House passed an oil tax reform bill to roll back some of the most damaging aspects of the ACES tax increase of 2007. That bill, House Bill 110, has since been languishing in the Senate, bottled up in committee. In two sessions it has not been given a floor vote or even amended in committee more to the Senate’s liking. Usually, amendments are how compromises get started.
Not this time. Senate leaders spent two legislative years, untold hours of hearings and big bucks on consultants coming up with a different bill that, in the end, could not draw enough votes in their own 16-of-20 super majority to pass. One reason for the failure was that their bill, Senate Bill 192, was too clever by half. It had been given a ridiculously long, two-page title that prevented much compromise under the rules of the legislature. My way or the highway, in other words.
When that failed, Senate leaders who had been lecturing anyone who would listen on the virtues of going slow and being cautious, pulled an obscure bill out of legislative oblivion, grafted certain sections of SB 192 onto it in a single committee meeting, rammed it through the Senate a few hours later, then sent it back over to the House for action with only a day left. To their credit, House leaders were not stampeded. Hence, the special session.
All the trickery aside, what matters most is what happens next. There is still an opportunity to get this right.
The bill that the Senate rushed over to the House has constructive relief for new oilfields, a step in the right direction. However, it is far too narrow. It leaves Alaska with a Chilkoot Charlie’s tax policy — “we gouge the other oil field and pass the savings on to you.” The private sector is generally not fooled by such trickery. Today’s new oil will become tomorrow’s old oil, in annual peril of being “reclassified” by politicians hungry for more pork to hand out.
A good compromise bill will have two simple elements to it. First, it will alleviate the extreme progressivity that causes Alaska government “take” to become confiscatory as oil prices climb. This is important. Oilfield economists know that prices go up and down over time. They assume that high profitability during periods of high prices offset losses when prices are low. Any taxing region that takes away the upside for industry will find itself underperforming, as Alaska has.
Second, a good bill should not try to skim off the vast majority of profits from existing fields. At today’s oil prices or higher, the incremental government “take” on existing oilfields is between 70 and 90 percent. That is too greedy. It reduces the incentive to invest in existing fields, which is where most easily recoverable oil lies. The old Chilkoot Charlie’s joke is just that, a joke. It is not wise tax policy.
In order to address this issue successfully, our State Senators must do what successful policy makers have always done: don’t be greedy, set aside the trickery and negotiate in good faith. The next generation of Alaskans is counting on it.
• Hawkins is president of Advanced Supply Chain International, an oilfield services firm headquartered in Anchorage that employs more than 200 Alaskans. He serves on the board of the Alaska Council on Economic Education and is chairman ProsperityAlaska.org.
Comments (18)
Add commentHo hum...
Ignore this industry shill.
I'm trusting the Senate on this matter. They're looking out for Alaskans, not oil companies.
Oil Shill Weighs In On Senate Heros
Hawkins has spent no time in Juneau, yet he states, "Senate leaders spent two legislative years, untold hours of hearings and big bucks on consultants....." Thank goodness they did.
If it wasn't for the Senate this state would be short $2 billion a year on a crackpot, giveaway plan to enrich Big Oil further. Hawkins and his oil shill buddies are selling out Alaska in a heartbeat to curry favor with their oil bosses. It's disgusting.
history lesson
The oil industry has been ripping off alaskans since oil was discovered. Anyone who has looked very long at taxation and the pipeline tariffs can see that. Our government has thought it was more important to be cozy with industry so they would still like us and not take their investments outside. Well shazam, they took their investments outside.
As one of the recipients of the rip off, Hawkins wants to protect his gravy train and continue the policies that have been good for him, making it all about the "jobs" for his industry. Hawkins should learn about alaska. The resources belong to the citizens, not industry. Maybe he should move back where he came from.
I would love to see the facts
I would love to see the facts about how much the oil companies have made, have invested and how much the state has gotten over the history of the oil fields. I think we would see a very one sided benefit. Of course we would never get to see those figures...
But is he factual?
I hear you, but are his facts correct? Has the Senate acted in good faith or are they playing a shell game here in the name of protecting Alaskans? A pedestal tends to be three-legged folks, be careful what valuables you put on one.
Astute Republicans
It is great to see Republican Senators putting the best interst of Alaskan's before partisan politics.
Parnell is so off base on ths issue that the usual right-wing-nuts of this comment forum are not even trying to defend him any more. How can they?
Stevens and Stedman thank you.
Oh, I'll defend Parnell, once
Oh, I'll defend Parnell, once I wade through all the leftist blather. All I read are attacks. There's no real substantive discussion.
This is the first article that makes a whole lot of sense and yes, it actually comes from someone in the industry. Now if that was someone expousing the liberal side, he'd be called an expert.
If the progressives would spend two seconds studying a basic course on economics (and not that Keynesian crap) maybe you'd see the forest for the trees.
Right now you all just sound like whiny, greedy brats attacking an industry.
Hey chip, welcome to the 21st century. Someone doesn't have to be sitting right under ones nose to know what's taking place in the big capital city of Juneau.
Good Advice
It would be great if the oil companies and yourself followed the same advice you are giving the Senators:
"don’t be greedy, set aside the trickery and negotiate in good faith."
Slow and steady wins the race. Our Senators are not concerned with next quarter's profits for the oil companies they are making decisions for generations to come and this is why they need to take the time to make the right choice.
Don't be greedy: Oil companies sought tax reductions when they according to themselves said that: "There was a time when Alaska was more generous than they needed to be.
Set aside the trickery: Oil companies make a committment not just a promise.
Negotiate in good faith: Open up your books to show us why you need the tax break. Tell us where you will invest the billions of dollars.
OK, Calypso, I'll take a run at this...
First, this article comes from 'someone in the industry'; well, yes, they would say that, wouldn't they.
Second, 'leftist blather'; I am a republican, and I know a lot of republicans and we're all scratching our heads on this one. No one understands why a fiscally conservative governor wants to "socialize the risk" for the oil companies to the tune of 1.7 billion dollars. Sounds like the Wall Streeet bailout to me.
During ELF (economic limiting factor) the Oil Companies paid extremely low tax rates. Oil production did not increase.
In fact, at no time in the last 20 years has production increased. Historically, there has been absolutely no connection between tax rates and oil production. Why should Alaskans believe that to be different now?
If taxes are reduced, the oil companies should agree to performance standards and guarantees. So far, crickets.
The burden is on the oil companies to demonstrate that a reduction in taxes will result in increased prodcution. Yet, all we hear from them is whining, mewling and puking - no promises, no committments.
You must mean the industry are the whiny, greedy brats.
What is our fair share of existing oil field royalties?
"At today's oil prices or higher, the incremental government 'take' on existing oil fields is between 70 & 90 percent." Is this statement factual?
Was Senate Bill 192 given a two page title?
I will say though that the
I will say though that the oil industry seems to be the main one that govt takes a big chunk of. Are they doing the same for mining, logging, fishing and all extraction industries in AK? Wheres my mining pfd?
@adcme9 - ""socialize the
@adcme9 - ""socialize the risk" for the oil companies to the tune of 1.7 billion dollars."
Did you make that up yourself? That's quite a mouthful coming from a "republican"! Well, maybe not so surprising since Alaska seems to have its own special brand of republican. 'Gimme, gimme, gimme, what's in it for me...?'
The burden of proof is on you to prove these statements - "In fact, at no time in the last 20 years has production increased. Historically, there has been absolutely no connection between tax rates and oil production."
I'm not buying it and if it is true I'm guessing the oil industry is not to blame. Rather the EPA, politicians, envirofreaks and the long list of other impediments to oil production.
tax breaks
The Governor wants to lay out "benchmarks" for the gasline including financial estimates and work schedules. Why isnt he doing the same with the oil industry? Where are the financial estimates, work schedules, benchmarks for them to meet before granting tax breaks to them? What a sweet deal for the oil companies. Mega tax breaks, no legal commitment to do anything, no explanation as to where the $2 billion per year amount even came from, all the while Alaskans continue to pay higher fuel prices than the majority of the U.S. He used to work for the oil industry? Sounds to me like he still does.
Just say no
To giveaways to Big Oil during record oil prices.
The author writes; "A good
The author writes; "A good compromise bill will have two simple elements to it. First, it will alleviate the extreme progressivity that causes Alaska government “take” to become confiscatory as oil prices climb". Progressivity was designed carefully to let the state FINALLY get a fair share of the fiscal value of it`s resources after years pf subsidizing ELF and losing close to 60 billion (in 1992 dollars!!). That money we "invested" in tax credits "UP FRONT", so the companies could recoup their investments sooner, at the state`s expense. The state put in progressivity into the formula to "claw back" some of that record profits now accruing to the producers. To say this fair share is confiscatory or gouging is to say that the taxes received under ELF were fair. Ludicrous. For this tax debate to continue we need to define what "new" oil is as opposed to "old" oil. Until we do that and decouple taxes we are far better off to leave ACES as is. Every indication is that ACES will work well for the next 6 billion barrels of "easy" oil that are currently "economic" (by their secret standards) to produce. If a project surfaces that warrants tax changes to the system, we need to as a state be clear about what it is, what it will produce and cost, and who`s doing it and what exactly are they doing. We cannot have a functioning fiscal system as a sovereign without that BASIC INFORMATION. Then we can surgically apply tax cut levers fairly, and not in the dark like mushrooms.
Same fight, nothing new. The
Same fight, nothing new. The companies don't need to make promises to us. They're private and WE started giving away the oil. We keep saying if we are going to give them more they should make commitments to what we will get. Not how it works. Stop trying to distract that our gov has been pushing this on us with no sustainable facts. Even the commish of rev couldn't answer simple straight forward questions asked of him that he should have been prepared to answer.
I actually don't blame the oil companies on this one, the only thing they have said is they would support the govs bill. They're being the most honest if not forthcoming about the whole thing.
jmacinak
Articulate. So we are "clawing" back funds we should have received from ELF. So a 70-90% take is justified and fair? Old oil v. New oil. That would be easy wouldn't it?
@Calypso - declining pipleline throughput since 1988....
Check the link below,
http://www.google.com/url?sa=t&rct=j&q=transalaska%20pipeline%20flow&sou...
Checked the link, viewed it Calypso
I looked at the link you supplied. Thank you.
It was great advertising and promotion. Wow, it made me think I just need to buy and agree with all they promised.
I've seen other advertisements like this many time. At least this time,I followed your advice and looked at it -
That was just before I trashed it as nonsense.
Thanks for the recommendation. It failed to impress me